Oregon treasurer pitches plan to pay for college

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SALEM, Ore. (AP) — Oregon Treasurer Ted Wheeler has a plan to make higher education more affordable, proposing the state take on debt so students don't have to.

Wheeler's plan, which faces several legislative hurdles and would have to be approved by voters, aims to use proceeds from state bond sales to establish a permanent scholarship fund to help students from low- and middle-income families attend a university or community college, or to receive vocational training.

"It would be a fund unlike anything else that we've been able to find anywhere else in the United States," Wheeler said, testifying before the Senate Education and Workforce Committee on Thursday.

The state typically invests in physical capital such as buildings and roads. Investing in students, human capital, is something new, Wheeler said.

The plan, embodied in Senate Bill 11 and House Joint Resolution 1, advanced from the Senate committee with a 3-1 vote after more than an hour of testimony from students. The bills now go to different legislative committees for review. If approved, the plan would be put to Oregon voters, most likely in 2014.

Wheeler, who's been treasurer since 2010, said his proposal is projected to eventually triple the amount of scholarship money available to help students fund higher education by selling $500 million in bonds backed by the state's general fund. It would use the interest earned, estimated to be about 7 percent per year, to establish a permanent fund for student aid.

Republican Jeff Kruse of Roseburg, the dissenting vote, said he understands that higher education is underfunded, but he isn't reassured that taking on debt is the solution.

"I get concerned over how much debt we're creating and how long it's going to take to pay it back," he said.

He suggested trying to reduce the cost of higher education.

"I wish we looked at why the cost of education has skyrocketed over the past few decades, and we pretty much ignore that," Kruse said. "We try to come up with ways to fund this accelerating curve without looking at other ways we can flatten the curve."

The plan will likely be sent to a capital construction budgetary subcommittee where it could be restructured — and the proposed $500 million bonding level lowered — as it competes with other projects seeking general fund-backed bond money, said the treasurer's office.

The state currently awards between $40 million and $50 million in "opportunity grants," which are given on a first-come-first-served basis, leaving more than 80 percent of eligible students without financial aid. Wheeler said his plan could increase this fund by 50 percent in the first year.

The cost of higher education can be a barrier to higher education for young people around the country, and in Oregon particular.

Oregon's public colleges have seen the greatest spike in enrollment numbers over the past five years, yet the state ranked fifth-lowest in the nation for the amount of public support it provides students, according to a report by the Association of State Higher Education Executive Officers released Wednesday.

Reduced available financial aid and higher tuition fees mean students pay more to go to college, leaving many students like Kevin Rackham, a political science major at Portland State University, drowning in debt.

Rackham said not going to college was never an option, but the cost has been staggering. When he graduates he will owe about $25,000 in student loans.

"It's always hanging over your head," he said. "You always know that you're going to have to pay it off."

In 2012, Rackham was part of a student project that came up with a debt-free model for funding higher education. The proposal is called "pay-it-forward," where students attend college tuition-free and then pay a percent of their income after graduating into the fund that enabled them to attend college.

Rep. Michael Dembrow, D-Portland, was intrigued by the students' idea and helped introduce it to the Legislature.

Dembrow, chair of the House Higher Education and Workforce Committee, said making college more accessible and affordable is a priority.

During the past five years, taxpayer support for Oregon students dropped by about 32 percent, from $5,660 in 2007 to $3,850 in 2012, the Education report found. For 2012, the national average is $6,500.

"If the University of Oregon slumped this low in the rankings, they'd be looking for a new football coach," said Steve Hughes, director of Oregon Working Families, which is backing the treasurer's endowment plan and the pay-it-forward proposal.

"It's killing students," he said.

But it could have been worse, said Diane Saunders, a spokeswoman for the Oregon University System. She said public universities reorganized and consolidated departments, and suffered layoffs and furloughs to keep tuition hikes as low as possible. It costs an average of $7,800 for tuition and fees in to attend a public college in Oregon, Saunders said.

"We have gotten used to doing more with less but there is a breaking point," she said.

Gov. John Kitzhaber set a target for the state that 80 percent of the adult population would have college credentials by 2025. But without the resources to pay for college, some students will remain shut out, Saunders said.

On the national stage, student-loan debts recently tripped over the $1 trillion mark, according to a February report by the Federal Reserve of New York.

The number of borrowers and the amount of money being borrowed is increasing dramatically, rising nearly 70 percent since 2004, the report said. At the same time, the share of young people taking out student loans has jumped from 27 percent of 25-year-olds in 2004 to 43 percent in 2012, the report found.

Student debt doesn't just impact the individual, said Portland State University economics professor Mary King. She said students with debt tend to "put off adulthood" after graduation, and don't buy cars or houses as they used to.

"We end up paying for it as a society," she said. "We need to invest in our young people."